The Union cabinet will consider the proposal on raising the dearness allowance to 90% , at its meeting on FridayAhead of the festive season, the UPA government is set to hike the dearness allowance (DA) of its employees by 10%, a move that will benefit almost 8 million people by boosting their purchasing power.

The Union cabinet will consider a proposal on the raising the allowance, which is a proportion of basic pay, at its meeting on Friday.

In what can be seen as major sop for a large section of aam aadmi, this will be the second DA hike in a financial year. More importantly, also ahead of the 2014 general elections.

The Centre’s decision will not only directly benefit 5 million employees and 3 million pensioners, but also help infuse more money into the economy.

Top government sources said the new DA rates would be applicable from July 1.

The sources further said the exact amount of DA, as a proportion of basic pay, works out to over 90% after factoring in the revised All-India Consumer Price Index for Industrial Workers (CPI-IW) for June.

According to revised data released on August 30, retail inflation for factory workers for June stood at 11.63%, higher than the provisional estimate of 11.06% for the month released on July 31.

The double-digit hike in DA would come after three years. It was last in September, 2010, that the government had announced a hike of 10%.

The DA was hiked to 80% from 72% in April 2013, effective from January 1, this year.

As per practice, the government uses CPI-IW data for past 12 months or a year to arrive at a number for the purpose of any DA hike. Thus, the retail inflation for industrial workers between July 2012 and June 2013 will be used to take a final decision.